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Mexico: Pemex privatization advances

Submitted by Bill Weinberg on Wed, 04/09/2008 - 06:50

Mexican President Felipe Calderón's government has submitted a bill to the Senate that would give the state oil company Pemex greater flexibility to hire outside subcontractors and seek private investment. Energy Minister Jordy Herrera denied the bill will propose changes to the constitution, which reserves the ownership of oil resources to the state. However, the move comes just as Chevron has announced proposals to tap Mexico's oil and natural gas reserves. Chevron's Latin American operations chief Ali Moshiri said the company wants to make Mexico "a big part of our portfolio." (Houston Chronicle, April 8)

Calderón portrayed the move as a necessity mandated by the need to seek foreign capital and technology to access deep-water off-shore reserves. "We must act now," he said in a televised address to plug the bill. "Time and our oil are running out." He denied that the move was a step towards privatization, saying: "Our oil is, and will continue to be, the property of all the Mexican people. Our aim is to make Pemex stronger."

But leaders of the left-opposition Party of the Democratic Revolution (PRD) announced they would launch a massive campaign of civil disobedience against the "privatization" of Pemex. Claudia Sheinbaum, a top aide to PRD leader Andrés Manuel López Obrador, said 10,000 female members of a PRD "resistance brigade" would take to the streets to stop the bill.

In an official evaluation released in March, Mexico's energy secretariat said Pemex's oil reserves had fallen 27% between 2002 and 2007. Last year, the company generated $104.5 billion in revenue—allegedly leaving the company with a $1.5 billion loss after paying salaries and other costs. Under Calderón's proposal, Mexicans would be able to buy "citizen bonds" in Pemex. López Obrador sees this as a back-door privatization of Pemex. "That's how they privatized the electric utilities," he said. "And now 35% of the industry is owned by foreigners." (LAT, April 9)

While the state-owned Federal Electrical Commission (CFE) and Central Light & Power (LFC) maintain an ostensible monopoly on Mexico's electricity sales, by 2004 some 30% of generation was provided by private entities. (Guide to Electric Power in Mexico, Texas General Land Office, 2004)

Chevron, the largest US energy company behind ExxonMobil, has $13.4 billion in oil and gas projects under development from Brazil to the Louisiana coast. The company's Moshiri said Mexico, which nationalized its oil industry in 1938, is missing out on billions in investment dollars by not opening the sector. Mexico has 12.4 billion barrels of untapped oil reserves, or 10% of the world's crude, according to the US Energy Department. But most formations in the Mexican section of the Gulf of Mexico remain unexplored or inaccessible, the department said in a December report. Mexican crude output has declined 15% since peaking at 3.454 million barrels a day in December 2003.

"The opportunity in Mexico is very vast and we just need the door to be opened to us," Moshiri said. "If you look at Latin America as a whole, Mexico has been way behind any other countries, including Venezuela, which at least is open for us to do business in. In Mexico, we don't even have access to exploration, not even high-risk exploration, or production." Chevron's has submitted new proposals to the Mexican government to explore for oil in the deepest areas of the Gulf of Mexico.

"Mexico has been closed for so many years that all that's been explored is 250 feet of water in the Gulf of Mexico, while on the US side of the gulf we're exploring in 10,000 feet of water," Moshiri said.

Bloomberg News reports that Mexican President Felipe Calderón told bankers at a conference in Acapulco April 3 that he is optimistic opposition lawmakers will eventually agree to relax controls that have kept Mexico off-limits to international companies.

Pemex has already signed technology-sharing agreements with Chevron, ExxonMobil, Royal Dutch Shell, Norway's StatoilHydro, Brazil's Petrobras, Canada's Nexen and Denmark's Maersk Oil & Gas. But Moshiri expressed impatience with Calderón's unwillingness to change the constitution. "You're not going to ask a major oil company to come there for an itty-bitty project," he said. "We've got opportunities elsewhere." (Bloomberg, April 8)